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Whew. We're still here. The Mayan doomsday prophecy for Dec. 21 was wrong, something the stock market seemed to anticipate by rising more than 1% on the week. That was an especially decent result in view of the doomsday scenario playing out in Washington, where politicians remain firmly at odds over how to manage the country's finances.

Stocks fell about 1% Friday, halving their intraweek gain, after the House of Representatives failed to pass the so-called Plan B tax bill promised by House Speaker John Boehner. That head-fake refueled worries that Washington won't come to an agreement on the—dare we say it—coming tax hikes and government cuts. Some call it the fiscal cliff.

The past month's stock rally was largely predicated on an assumption that the Obama Administration and House Republicans would come to a compromise in a timely manner—if not exactly by the ostensible Dec. 31 deadline.

Many expected the tax bill's failure to whack equities, but the market's muted reaction suggests there remains a fair amount of expectation among investors that a deal will be struck. The Dow Jones Industrial Average rose 56 points, or 0.4%, on the week, to 13,190.84, while the Standard and Poor's 500 index gained 17 points, or 1.2%, to 1430.15. The Nasdaq Composite added 50 points, or 1.7%, to 3021.01.

"I'm still constructive on the market and cautiously optimistic," says Seth Setrakian, a partner at First New York Securities. "Somewhere there is competence in Washington. There's a middle ground and they have to find it." The market will tolerate extending the deadline into January if there is strong evidence that a deal is coalescing, he adds.

Since plenty of cash remains on the sidelines, market observers generally think indexes will leap in the event of a deal, perhaps to 1500 or more on the S&P 500 in a relatively short period of time. That could be followed by a kneejerk profit-taking round once the details of the tax hikes and government spending cuts are digested. "We could have a deal, but it's what's in the deal that matters," says Kim Forrest, a senior equity analyst at Fort Pitt Capital Group.

WHILE THERE MIGHT BE a fiscal cliff, "it doesn't look like we are about to fall off an economic cliff," Forrest says. On the whole, last week's important economic data continued an upswing seen in recent weeks. U.S. third-quarter gross domestic product was revised upward, for example, to 3.1% from 2.7%. Small-business merger and acquisition activity seems lively, she adds, and that's a good sign for equities.

It has been a year of relatively low stock-market volatility but the longer these fiscal talks drag on, the more likely that will change.

NYSE holders can take cash now by selling into the market, or wait for the cash or ICE stock or some combination thereof in 2013. ICE is offering NYSE holders about $33.12 a share, or 0.258 of an ICE share, or a mix of $11.27 in cash plus 0.17 of an ICE share for each NYSE share. ICE is paying a 38% premium to the last NYSE closing price before the deal was announced Thursday. NYSE closed at $32.25, and ICE at $126.25.

There should be plenty of time to cogitate. However, any investor contemplating cash must consider that tax rates on capital gains are likely to go up in 2013 from the current 15%. Selling NYSE shares into the market before year end 2012 could bring a lower tax bill.

And, given the premium being paid, gains there will be if you bought the NYSE stock in 2012, potentially big ones if you purchased after March.

The way things look now, for a long-term-oriented investor, waiting to take all ICE stock might be the soundest way forward. For one thing, it will obviate the capital-gains liability, now or next year. And NYSE holders will get their 3.7% dividend yield while waiting. ICE doesn't have a dividend.

Second, and more important, this looks like a good deal for ICE, a big player in commodities exchanges and a leader in derivatives, particularly on energy. For investors who take its shares, it will be a good way to participate in ICE's future growth and the profits it can wring out of the NYSE acquisition.

"ICE got a great deal," says Martin Leclerc, the chief financial officer at Barrack Yard Advisors, which holds NYSE shares. Given the relatively slower growth prospects for equities trading compared with derivatives, "the combined company is much better positioned to take advantage of the future than NYSE alone."

ICE is mainly interested in NYSE's Liffe, the London-based derivatives market, which is a leader in commodities and interest-rate derivatives products. Growth there is likely to be higher than that of the cash equities trading of the NYSE and the four Euronext exchanges in Paris, Amsterdam, Brussels, and Lisbon.

In the past five years or so, the NYSE trading floor's market share in equities trading has fallen to less than 25% from about 80%. Volume has gone to faster and cheaper nontraditional venues such as the interbank-operated dark pools and BATS Global Markets, among others. Greater regulation, less of an issue for derivatives exchanges, has cost the stock exchanges, as well.

Leclerc attributes about $6 billion of the acquisition value to Liffe and $2 billion to the rest. Moreover, ICE is going to hive off Euronext one way or another. It probably is worth about $1 billion, according to a report from Sandler O'Neill & Partners.

"But [the NYSE's] equity-trading business conditions are probably at a bottom," says Leclerc, and ICE can improve the NYSE's cost structure. "ICE's chief executive, Jeffrey Sprecher, has a phenomenal track record," and the $450 million in cost synergies are "pretty credible….Liffe is a big opportunity for ICE."

Additionally, there's a strong case for the long-term growth of derivatives trading. Regulators are trying to inject more transparency into the relatively opaque world of derivatives trading, notes Leclerc, by pushing such activity onto exchanges and away from over-the-counter markets.

It's going to be a long wait, and that adds to the decision risk. It's hard to predict the regulatory landscape one year out. And there's always the possibility that regulators will object, or that the deal could fall apart somehow, but those are relatively low risks.

Says Leclerc: "If I had to do decide today, I'd take the stock." Waiting for the ICE man seems worth it.

WITH THE HOLIDAYS UPON US, it's the season when everyone, including Barron's columnists, examines the year that's about to close. The U.S. stock market is up 14% year to date, so in purely financial terms, we'd like to look back with fondness.

Alas, we cannot, at least not when it comes to the 80 or so stock and sector calls that this column typically publishes annually. The average price return of the column's stock picks during the course of the past 12 months was 4% as of Dec. 18, significantly below the S&P 500. (This reckoning doesn't include guest-columnist picks. Stocks are measured from the Friday before the item is published, and we've left out group and sector picks, some of which had five names and more listed.)

This performance puts us in a slow, but big boat: Some 75% of domestic long-only mutual fund managers were underperforming their benchmarks as of Dec. 18, according to Lipper. But it's cold comfort.

In particular, we pointed out how undervalued the initial bid for Great Wolf was during the buyout battle for its shares waged last spring. The stock subsequently rose 41%. We also noted that a split-up of
Ralcorp
(RAH) into separate branded and private-label food companies would attract buyers, and it did.
Con AgraCAG 2.0169851380042463%Conagra Brands Inc.U.S.: NYSEUSD38.44
0.762.0169851380042463%
/Date(1481320949098-0600)/
Volume (Delayed 15m)
:
4464083AFTER HOURSUSD38.44
%
Volume (Delayed 15m)
:
P/E Ratio
25.69346968785509Market Cap
16495173319.632
Dividend Yield
2.0811654526534857% Rev. per Employee
550804More quote details and news »CAGinYour ValueYour ChangeShort position
(CAG) recently agreed to buy Ralcorp. The return for the two companies has been 36%.

Regarding Alpha, we checked back with David Steinberg, a deep-value portfolio manager with DLS Capital Management. He's continued to load up on coal stocks. Global coal demand is going to surprise folks, and natural-gas prices—an alternative—have begun to rise, he says. We think in the long run he'll be right about coal, but it's been a tough year.

The worst pick was small-cap
Poseidon Concepts
(PSN.Canada), which makes water-holding tanks for energy-exploration firms. Day rental rates have fallen sharply and drilling activity has dropped, leading to a big unexpected decline in third-quarter earnings. The stock is down 75%. That's just one call out of many, but it's a painful loss. Without our coal and Poseidon picks, we'd be up 6%, a little better but still not great.